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IN THIS ISSUE: • A New Measure of Industrial Activity: District Manufacturing MONTHLY REVIEW Production Index • Term Lending: A lagging Respundent to Monetary Restraint • Banking Notes • District Dusiness Conditions F E D E R A L R E S E R V E B A N K OF A T LA N T A JU N E 1970 A N e w M e a s u r e o f In d u s t r ia l A c t iv it y : D is t r ic t M a n u f a c t u r in g P r o d u c t io n In d e x A n e w m o n th ly m e a s u r e o f S ix th D is t r ic t m a n u G overnors o f th e F ed eral R eserv e fa c tu r in g p r o d u c tio n h a s b e e n d e v e lo p e d b y th e v id e s c o m p r e h e n s iv e , m o n t h ly p r o d u c tio n d a ta o n S y stem , p ro F e d e r a l R e s e r v e B a n k o f A tla n ta . T h is m e a su r e a o f p h y s ic a l p r o d u c tio n , d e s ig n a t e d a s t h e “ D i s w ere n o tr ic t M a n u fa c tu r in g P r o d u c tio n I n d e x ,” p r o v id e s le v e l. A lt h o u g h U . S . C e n s u s p u b lic a tio n s , s u c h a s an Census of Manufactures a n d Annual Survey of Manufactures, d o p r o v i d e v a r i o u s e m p i r i c a l u p -to -d a te r e g i o n ’s m o n th ly o u tp u t m a jo r m a n u fa c tu r in g change in th e in d u s tr ie s . c u r r e n t b a s is . H ow ever, up u n til c o m p a r a b le d a ta a t t h e now , S ix th th e r e D is tr ic t s t a t is t ic s t h a t p e r ta in to lo c a l m a n u fa c tu r in g p r o The Production Index and Its U se s d u c tio n , th e ir very To rem o v e th e e f fe c ts o f p r ic e c h a n g e s o v e r a u s e fu ln e s s in lim ite d . T h e y cu r r e n t a n a ly s is a r e p u b lis h e d w it h t w o -y e a r la g a n d c o n t a in o n ly y e a r ly is about a gross sta p e r io d o f t im e , o u tp u t h a s b e e n e s tim a te d in c o n t is t ic s . M o n t h ly d a ta fo r m a n u fa c tu r in g e m p lo y s t a n t d o lla r s . O u tp u t, fo r 1 8 o f 2 1 t w o -d ig it S I C m e n t, w h ic h (s ta n d a r d in d u s tr ia l c la s s if ic a tio n ) c u r r e n t b a s is , d o r e v e a l s o m e t h in g a b o u t r e g io n a l in d u s tr ie s , is a r e r e g u la r ly a v a ila b le o n a fa ir ly c a lc u la t e d fr o m tw o fa c to r in p u t v a r ia b le s — m a n - m a n u fa c tu r in g h o u r s e m p lo y e d a n d k ilo w a tt h o u r s g e n e r a lly r is in g tr e n d in la b o r p r o d u c t iv it y a n d e le c tr ic p ow er co n su m ed . T h ese (K W H ) e s tim a te s of and th o s e fo r th r e e m a jo r in d u s t r ia l g r o u p s ( d u r a b le s , b eca u se a c tiv ity . o f c e r ta in H ow ever, s ta tis tic a l b eca u se lim it a t io n s , of a to be d is c u s s e d la te r , r e g io n a l a n a ly s t s r e g a r d t h e e m per se n o n d u r a b le s , a n d to ta l m a n u fa c tu r in g ), a re in p lo y m e n t d a ta d e x e d in r e la tio n to th e ir 1 9 5 7 -5 9 a v e r a g e s a n d m e a s u r e s fo r c u r r e n t m a n u f a c t u r in g p r o d u c tio n . a re a d ju ste d to rem ove th e e ffe c ts o f se a so n a l m o v em e n ts. a s r e la tiv e ly p o o r s u b s titu te A s id e fr o m it s u s e f u ln e s s fo r c u r r e n t a n a ly s is , th e new D is t r ic t p r o d u c tio n in d e x p r o v id e s a p r o d u c tio n h is to r ic a l p e r s p e c tiv e fo r a n a ly z in g a n d c o m p a r in d e x s a t is f ie s a n im p o r ta n t n e e d . B y p r o v id in g a in g in te r in d u s tr y a s w e ll a s in te r r e g io n a l m a n u r e a s o n a b ly r e lia b le a n d u p -to -d a te a c c o u n t o f th e fa c tu r in g a c t iv it y o v e r a p e r io d o f tim e . U s e d in The new D is tr ic t m a n u fa c tu r in g r e g i o n ’s m a n u f a c t u r i n g a c t i v i t y , t h e n e w d a t a a d d t h is w a y , it c a n s h e d lig h t o n v a r io u s fo r c e s a f a n o th e r d im e n s io n to th e s t u d y o f o n e o f th e r e f e c t in g g i o n a l e c o n o m y ’s m o s t d y n a m i c s e c t o r s . A t t h e F u r th e r m o r e , in th e ir d e c is io n m a k in g , b u s in e s s e s n a tio n a l and le v e l, th e in d u s tr ia l p r o d u c tio n in d e x , w h ic h is c o m p ile d a n d p u b lis h e d b y th e B o a r d o f fo r r e g io n a l g r o w th and c y c lic a l b e h a v io r . g o v e r n m e n t a g e n c ie s w ill h a v e th e ir n e e d s r e g io n a l p r o d u c tio n d a ta — a t le a s t p a r t ia lly . p la n n e r s to know d a ta I t is so m e th in g f ille d by th e n ew o fte n c r u c ia l about con cu rren t fo r c h a n g e s in p r o d u c tiv it y fa c to r s o f in d iv id u a l in M o n t h ly R eview , Vol. L V , No. 6. Free subscription d u s tr ie s a n d in th e ir p h y s ic a l o u tp u t. C h a n g e s in and additional copies available upon request to the Research Departm ent, Federal Reserve B a n k of Atlanta, A ltanta, G eorgia 30303. im p o r ta n t 74 t h e s e k e y v a r ia b le s o f te n h e lp p o in t o u t c e r ta in changes o c c u r r in g in p r o d u c tio n ef M O N T H L Y R E V IE W ficiency or in the relative structure of regional industries. Fo r instance, a growing number of m anufacturers continuously study their produc tion efficiency for the purposes of cost control and other corporate planning. The new D istrict indexes w ill facilitate the an alytical work needed for this type of study. It should be emphasized that these and related studies have often been hampered by the lack of m eaningful regional pro duction data. In th is respect, the new D istrict index is a modest step forward in the im prove ment of regional analysis. of the two input factors. M onthly output figures are then carried forward u n til Census data be come availab le, at which tim e the output figures are adjusted to the new bench m ark data. The concepts and methods used in the D istrict pro duction index are sim ilar to those in the U . S . production index. However, actual physical out put data, which account for nearly one-half of the weight of the national index, are not in corporated in the D istrict index. M an -h o u r and K W H Data a s Output Proxy M e a su re s M e th o d o lo g ic a l Orientation It should be pointed out that it is not economi ca lly feasible to derive a production index from actual production figures. F irs t, it is doubtful whether a ll m anufacturing firm s m aintain re li able m onthly output data. Secondly, even if they did, there s till would be form idable problems associated w ith m eaningfully aggregating numer ous and heterogeneous data. Consequently, the development of the D istrict production index had to rely on some form of observable input-output relationship. In estim at ing the new D istrict index, the previously men tioned two input variables—man-hours employed and K W H consumed—were used. The underly ing assum ption is that the rate of change in physical output is functionally related to the rate of change in these two input factors. Manhour and K W H data are generally available m onthly at the state level for two-digit S IC in dustries on a relatively current basis. The new D istrict index, like the U . S . index, is designed on the basis of the “ value added” concept. Value added by m anufactures, as de fined by the U . S . Bureau of Census, “ is derived by subtracting the total cost of m aterials from the value of shipm ent and other receipts and ad justing the resulting amount by the net change in finished products and work-in-process inventories between the beginning and end of the year.” As such, value added data are generally considered the most p ractical measure of net output produced by individual industries. When value added data of the D istrict’s individ ual industries are aggregated for the entire region, they reflect an approxim ation of the gross net products orig i nating in the region’s m anufactures. Since value added data are not available for the most recent years, current output estim ates are p artly based on extrapolating the productivity J U N E 1970 The use of the two input factors of production— man-hours and K W H data—as estim ating va ri ables for in d u strial output is based on conceptual and p ractical considerations. In general, changes in physical output are the results of changes in the quantity and q uality of input factors as w ell as changes in technology used in production. W hile it is very d ifficu lt to isolate em p irically these two “ effects,” a combination of two input variables in the same equation would reflect in teraction effects that could not have been taken into account if only one variable had been used. T h is point is p articu larly im portant, since, in the long run, the ratio between inputs of labor and K W H changes because of changes in tech nology and worker efficiency. Fo r instance, in many industries a rise in man-hour productivity was accompanied by a decline in K W H pro d u ctivity. T h is means that the relative im por tance of individ ual input factors changes over tim e as a result of one factor substituting for an other. To make the new D istrict index more reflective of these changes in the relative im portance of individual input factors, we made production estim ates separately, using man-hour data and K W H data independently. Then, we combined the two output estim ates in weighted form to derive the industry index.1 Using these two inputs in this fashion has s till another advantage; nam ely, it increases the sen sitivity of the index to actual changes in pro duction. Because em ployers are often unable to adjust their labor requirem ents to the exact pro duction schedule, man-hour data often conceal changes in actual demands for labor during some ' T h e w e ig h t s u s e d w e r e d e r iv e d f r o m c ie n ts o f th e p r o d u c t io n f u n c t io n . la b o r a n d c a p it a l c o e f fi 75 p h a ses of th e b u s in e s s b u s in e s s a c t iv ity b ility of c y c le , e s p e c ia lly Figure I w hen sta r ts d o w n w a rd . T h e in fle x i m a n -h o u r d a ta is fu r th e r ca u sed by SEASONAL PATTERNS IN DISTRICT MANUFACTURING PRODUCTION th e ir b e in g c o lle c t e d o n ly in a s in g le s u r v e y w e e k , w h ic h a lw a y s in c lu d e s t h e 1 2 th d a y o f t h e m o n th . T h ese fig u r e s ( c o lle c t e d s e r v ic e s ) by Parcint of Ann. Avg. s ta te e m p lo y m e n t a r e r e a lly m a n -h o u r s p a id fo r b y e m Nondurables p lo y e e s r a th e r th a n th e a c tu a l h o u r s o f p r o d u c tio n w ork ers. A nd fo r c e r ta in p r o c e s s in g in d u s tr ie s in w h ic h p r o d u c tio n m e th o d s a r e h ig h ly m e c h a n iz e d and a u to m a te d c h e m ic a ls ) , m a n -h o u r d a ta ( e .g . a num ber a r e e s p e c ia lly of poor in d ic a to r s o f p h y s ic a l o u tp u t. KW H d a ta th a t are c o lle c te d by th is Bank fr o m m a jo r u t ilit ie s in t h e D is t r i c t d o n o t h a v e th e se sa m e d ra w b a ck s. T h e y co v er th e to ta l e le c Durables tr ic e n e r g y c o n s u m e d b y a n in d u s t r y d u r in g a n e n tir e m o n th . A s s u c h , t h e y c lo s e ly a p p r o x im a te t h e a m o u n t o f e le c t r ic e n e r g y u s e d fo r th e fir m s ’ a c t u a l p r o d u c tio n . H o w e v e r , K W H d a ta a ls o h a v e c e r ta in im p e r fe c tio n s . B e c a u s e u t ilit ie s c a m p a n ie s u s e c y c le - b illin g m e th o d s , t h e r e p o r te d m o n t h ly K W H d a ta d o n o t n e c e s s a r ily c o in c id e w ith t h e a c tu a l m o n th in w h ic h t h e e n e r g y w a s c o n su m e d . I I I I I Jan. M o r e o v e r , e le c tr ic p o w e r u s e h a s str o n g s e a s o n I I I I I I June Dec. a lit y , w h ic h is r e la te d t o h e a t in g a n d c o o lin g r e q u ir e m e n ts d u r in g d iff e r e n t t im e s o f t h e y e a r . T o o v e r c o m e t h e s e d a ta p r o b le m s , w e f ir s t a p p lie d a c o m p o n e n t in d u s tr ie s ; a s s u c h , t h e y c o n c e a l s o m e m o v in g a v e r a g e m e th o d a n d s e a s o n a l a d ju s tm e n ts d iv e r s e s e a s o n a l m o v e m e n ts . H o w e v e r , t h e y to veal a o u tp u t O n ly e s tim a te s th e n , d id we th o s e d e r iv e d fr o m d e r iv e d fr o m r e g i o n ’s d a ta . c o m b in e t h e e s tim a te s w ith in d iv id u a l te s ts w ere p erfo rm ed in d u s tr ie s , to a ssess c e r ta in p e r s is te n c e S e a s o n a lity c o m p u te d sea so n a l re s w in g s of b o th d u r a b le and g o o d s o u tp u t h a s n o t c h a n g e d n o n d u r a b le s ig n ific a n tly be in d ir e c t tw e e n 196 1 a n d 1 9 6 9 . In a ty p ic a l y e a r , n o n d u r e m p ir ic a l a b le g o o d s o u tp u t s ta r ts d e c lin in g fr o m J a n u a r y tw o th e fo r of w h ic h c a n b e d e f in e d a n d g e n e r a liz e d . m a n -h o u r d a ta . A fte r p r o d u c tio n in d e x e s w e r e th e KW H b a s is .2 u n til m id s p r in g w h e n a lo w p o in t fo r t h e y e a r is B o th t e s t s in d ic a te d t h a t t h e p r o d u c tio n in d e x e s , re a c h e d . A t t h is p o in t, n o n d u r a b le g o o d s o u tp u t is v a lid ity of th e in d e x e s on a m o n th ly a s in d iv id u a l c o m p o n e n t s a n d a s a g g r e g a t e s e r ie s , a b o u t 9 6 .0 p e r c e n t o f i t s a n n u a l l e v e l . F r o m m i d a r e r e a s o n a b ly s p r in g , o u tp u t b e g in s t o r is e — r e a c h in g a s e a s o n a l r e lia b le m ea su res of m o n th ly c h a n g e s i n t h e o u t p u t o f t h e r e g i o n ’s i n d i v i d u a l peak in d u s tr ie s . a r e th e n o p e r a tin g a t a b o u t 1 0 3 p e r c e n t o f th e ir in la te annual S e a so n a l Pattern o f D istric t Production fa ll. average. N o n d u r a b le T h is s im ila r m o v e m e n t s in goods sea so n a l in d u s tr ie s s w in g m ir r o r s t h e c o m p o n e n ts ; n a m e ly , th e s e r ie s fo r fo o d , t o b a c c o , a p p a r e l, p r in tin g a n d P e r io d ic f lu c tu a t io n s b r o u g h t o n b y s e a s o n a l f a c p u b lis h in g , a n d le a th e r . S e a s o n a l p a tte r n s fo r d u r a b le s v a r y s ig n if ic a n t to r s ( s u c h a s t h e h a r v e s t r h y t h m s o f c r o p s w h ic h a ffe c t t h e fo o d p r o c e s s in g in d u s t r y ) a f fe c t p r o d u c ly tio n in m a n y in d u s tr ie s . F ig u r e I s h o w s s e a s o n a l r e m a in s lo w p a tte r n s o f d u r a b le a n d n o n d u r a b le g o o d s in d u s in g tr ie s in 1 9 6 1 a n d 1 9 6 9 . T h e s e p a tt e r n s r e p r e s e n t b e g in s a g g r e g a te s o f se a s o n a l m o v e m e n ts in g o o d s p r o d u c tio n r e a c h e s a s e a s o n a l p e a k , i t is in d iv id u a l fr o m n o n d u r a b le s . D u r a b le g o o d s p r o d u c tio n fr o m th r o u g h t h e w in te r , b e g in s e x p a n d e a r ly ta p e r in g s p r in g o ff u n til la te in * A u g u s t . su m m er, W hen th e n d u r a b le : T h e f ir s t t e s t r e lie d o n a d e t a ile d g r a p h i c a n a ly s is o f i n d i v id u a l in d e x s e r ie s ; t h e o t h e r t e s t r e l ie d o n a s t a t is t ic a l t e s t d e s ig n e d t o m e a s u r e t h e e m p ir ic a l r e le v a n c e o f D is t r i c t p r o d u c t i o n in d e x e s a g a in s t e m p lo y m e n t a n d p r o d u c t i o n d a t a . 76 M O N T H L Y R E V IE W a b o u t 102 p e r c e n t o f its a n n u a l a v era g e. A t se a s o n a l lo w p o in ts , h o w e v e r , d u r a b le p r o d u c tio n is b e tw e e n 9 7 a n d 9 8 p e rcen t. Im p o r ta n t c o m p o n e n t in d u s tr ie s s u c h a s tr a n s p o r ta tio n e q u ip m e n t, p r i TOTAL MANUFACTURING PRODUCTION -59=100 m a r y m e ta ls , a n d m a c h in e r y a r e la r g e ly r e s p o n s i b l e f o r t h e s e s e a s o n a l s w in g s . R ap id E x p an sio n in D istrict M a n u fa c tu rin g O utput V a r io u s changes m a n u fa c tu r in g flu e n c e d th a t occu rred d u r in g th e n ew recent in D is tr ic t years have in p r o d u c tio n in d e x e s , s h o w n in 100 F ig u r e I I . T h e D is t r ic t m a n u fa c tu r in g p r o d u c tio n in d e x m ore w hereas th a n th e d o u b le d U. S. fr o m in d e x 1960 to in c r e a s e d 1969, o n ly '63 61 p e r c e n t. T h is d iffe r e n c e is n o t su r p r is in g w h e n '65 '67 DURABLE PRODUCTION t h e D i s t r i c t ’s f a s t e r r a t e o f g r o w t h i n m a n u f a c t u r in g e m p lo y m e n t is p ercen t b e tw e e n c o n s id e r e d . 1960 and I t in c r e a s e d '69 300 44 1969, w h ereas U . S. m a n u fa c tu r in g e m p lo y m e n t g a in e d o n ly 2 0 p e r cen t. A c c o r d in g ly , t h e D i s t r i c t ’s s h a r e o f t o t a l U . S . m a n u f a c t u r i n g e m p l o y m e n t r o s e f r o m 8 .1 p e r c e n t in 1 9 6 0 t o 9 .7 p e r c e n t in 1 9 6 9 . Stru ctu ral R a p id C h a n ge in D istric t M a n u fa c tu rin g g ro w th in D is t r ic t m a n u fa c tu r in g o u tp u t r e fle c ts e x p a n s io n in t o ta l p r o d u c tio n a s w e ll a s s tr u c tu r a l c h a n g e , w h ic h b r o u g h t a b r o a d e r in d u s tr ia l b a se . g ro w th in L a r g e ly D is tr ic t r e s p o n s ib le to ta l fo r o u tp u t w a s th e th e fa st '63 '65 '67 r a p id NONDURABLE PRODUCTION e x p a n s io n in d u r a b le m a n u fa c tu r in g . O u tp u t fo r d u r a b l e s i n c r e a s e d 1 5 5 p e r c e n t d u r i n g t h e 1 9 6 0 ’s , Sm s . Adj. w h ile n o n d u r a b le g o o d s o u tp u t g r e w o n ly 7 2 p e r cen t. P henom enal g ro w th in p r im a r y m e ta ls , e le c t r ic a l a n d n o n e le c tr ic a l m a c h in e r y , a n d tr a n s p o r ta tio n D u r a b le e q u ip m e n t w as m a n u fa c tu r in g la r g e ly r e s p o n s ib le . e m p lo y m e n t a ls o in c r e a s e d r a p id ly . B e tw e e n 1 9 6 0 a n d 1 9 6 9 , d u r a b le g o o d s e m p lo y m e n t in c r e a s e d 63 p e r c e n t in th e D is t r ic t , b u t o n ly 2 6 p e r c e n t in t h e U . S . T h is r a is e d fr o m th e 5 .7 D i s t r i c t ’s p ercen t to n o n d u r a b le goods sh are 7 .4 of th e p e rcen t. U. S. to ta l C o n s e q u e n tly , m a n u fa c tu r in g a c tiv ity no lo n g e r d o m in a te s t h e in d u s tr ia l b a s e a s m u c h a s it h a s in t h e p a s t. D is t r ic t e m p lo y m e n t in n o n d u r a b le s d r o p p e d fr o m 6 0 p e r c e n t in 1 9 6 0 to 5 5 r e s p o n d in g U. S . in d u s tr ie s . H ow ever, changes fr o m m o n th -to -m o n th a n d d u r in g t h e c y c le v a r ie d c o n s id e r a b ly fr o m in d u s tr y to in d u s tr y . F o r in p e r c e n t in 1 9 6 9 . sta n c e , o u tp u t in D is tr ic t te x tile s a n d p r im a r y m e ta ls m o v e d u p a n d d o w n — g e n e r a lly w ith U . S . Behavio r of Se le cte d Indu stry O utput c o u n te r p a r ts, w h e r e a s s ig n ific a n t m o n th -to -m o n th D is t r ic t p r o d u c tio n in d e x e s o f s e le c te d in d u s tr ie s c h a n g e s w e r e a p p a r e n t w h e n t h e D i s t r i c t ’s c h e m i a r e s h o w n in F ig u r e I I I . O n b a la n c e , y e a r -to -y e a r c a l i n d u s t r y w a s c o m p a r e d w i t h t h e n a t i o n ’s . E x m o v em e n ts c e p t fo r b r ie f d e c lin e s in la t e 1 9 6 0 , t h e f ir s t h a lf a lm o s t p a r a lle le d J U N E 1970 th o se of th e cor 77 Figure I I I PRIMARY METALS TEXTILES 61 '63 65 '67 1957-59=100 69 PAPER & ALLIED PRODUCTS Sea*. Adj. o f 1 9 6 7 , a n d m id -1 9 6 9 , t e x t ile o u tp u t in t h e D i s tr ic t a n d U . S . s h o w e d c o n tin u o u s g ro w th . P a p e r o u tp u t in th e D is tr ic t a n d U . S . a ls o p a r a lle le d e a c h o th e r , e x c e p t in 1 9 6 3 , w h e n D i s tr ic t o u tp u t d e c lin e d c o n s id e r a b ly . A fte r 1963, t h e la t te r b e g a n t o o u t p a c e t h e U . S . u n t il m id 1 9 6 6 . U . S . p a p e r p r o d u c tio n g r e w s h a r p ly d u r in g ■61 ’63 '65 1968 '67 but s lo w e d dow n in 1969 w h ile D is tr ic t p r o d u c tio n a g a in p ic k e d u p m o m e n tu m . CHEMICALS & ALLIED PRODUCTS S h o r t-r u n d ir e c tio n a l m o v e m e n ts in D is tr ic t c h e m ic a l p r o d u c tio n h a v e c o n s i s t e n t l y r im c o u n Silt. Adj. ter to th o s e o f th e U . S ., b u t l o n g - t e r m m ove m e n ts h a v e u s u a lly p a r a lle le d th e U . S . I n s o m e m o n t h s d u r in g 1 9 6 0 , 1 9 6 1 , 1 9 6 2 , a n d 1 9 6 4 , h o w ev er, th e w h ereas D i s t r i c t ’s U. S. c h e m ic a l c h e m ic a l o u tp u t d e c lin e d , p r o d u c tio n d id n o t. S e a s o n a l a n d c y c lic a l s w in g s t h a t a r e u n iq u e to t h e D i s t r i c t ’s c h e m i c a l i n d u s t r y d o n o t s e e m to b e th e m a in r e a s o n fo r th e s e d iv e r g e n c e s . I n s te a d , d iv e r s e c y c lic a l p a tte r n s in d iff e r e n t r e g io n s t e n d to '61 '63 '65 '67 FURNITURE & FIXTURES Seat. Adj. '69 c o u n te r b a la n c e le v e l so each o th e r th a t m o v em e n t of at th e th e n a tio n a l n a tio n a l s e r ie s s h o w e d le s s m o n th -to -m o n th v a r ia tio n s . A s e x p e c t e d , t h e D i s t r i c t ’s d u r a b l e d u s tr ie s w ere h ig h ly flu c tu a tio n s o f th e ir s u s c e p t ib le n a tio n a l g o o d s in to c y c lic a l c o u n te r p a r t. O u t p u t o f t h e D i s t r i c t ’s p r i m a r y m e t a l s i n d u s t r y , i n p a r t ic u la r , f o llo w e d f a ir ly c l o s e l y t h e w id e c y c lic a l p e a k s a n d tr o u g h s o f U . S . p r im a r y m e ta ls b u t w ith so m e w h a t le s s e r r a tic s w in g s in o v e r a ll m o v e m e n ts . I f ta k e n a s g r o u p s, n o n d u r a b le s a n d d u r a b le s w e r e b u s in e s s U n ite d le s s r e c e s s io n S ta te s. a ffe c te d in th e D is tr ic t d u r in g D is tr ic t o u tp u t of th e th a n 1 9 6 0 -6 1 in th e n o n d u r a b le s , su c h a s te x tile , p a p e r , a n d c h e m ic a ls , e x p e r ie n c e d o n ly m ild s e tb a c k s . C. S. P y u n 78 M O N T H L Y R E V IE W Technical Note Available C o p ie s of T e c h n ic a l th e D is tr ic t N o te upon re q u est B a n k o f A t la n t a , 30303. T h is at and th e M a n u fa c tu r in g S ta tis tic a l R e se a rch g iv e s S u p p le m e n t D e p a rtm e n t, F e d e ra l R e se rv e s u p p le m e n t P r o d u c tio n a a re In d e x : a v a ila b le F e d e ra l R e se rv e S t a t io n , A t la n t a , d e t a ile d d is c u s s io n G e o r g ia of th e m e t h o d s u s e d in c o m p u t in g t h e p r o d u c t io n in d e x . I t a ls o c o n t a i n s m o n t h l y p r o d u c t i o n i n d e x e s f o r t h e D i s t r i c t ’s i n d i v i d u a l in d u s t r ie s . B a n k A n n o u n ce m e n ts On May 1, The Lawrence County Bank, Lawrenceburg, Tennessee, a newly organized member bank, opened for business and began to remit at par for checks drawn on it when received from the Federal Reserve Bank. Officers are J. E. Jackson, chairman of the board; W. A. Harwell, vice chairman; M. H. Weathers, Jr., president; M. J. Riddle, executive vice president; Carson Johnston, cashier; and Mrs. Zona Edwards, assistant vice president. Capital is $250,000; surplus and other capital funds, $500,000. G. M. Ross, Sr., chairman; Robert Eugene Prentice, president; and Robert S. White, cashier. Capital is $316,000; surplus and other capital funds $284,400. The First Bank of Clayton County, Morrow, Georgia, a newly organized nonmember bank, opened for busi ness on May 4. Officers are D. Hugh Dickson, president; and James W. Coody, executive vice president. Capital is $375,000; surplus and other capital funds, $375,000. $ 2 1 0 ,0 0 0 . Another newly organized nonmember bank, Peoples State Bank of New Port Richey, New Port Richey, Florida, opened for business on May 6. Officers are J U N E 1970 On May 14, First Bank of Marco Island, Marco Island, Florida, opened for business as a newly organized nonmember bank. Officers are R. F. Mackle, chairman of the board; A. W. Roepstorff, president; Neil E. Bahr, vice president; and John Mudd, cashier. Capital is $490,000; surplus and other capital funds, On May 18, Central Park First National Bank, Orlando, Florida, opened for business as a newly organized member bank. Officers are MacDonell Tyre, president; Thomas W. Long, executive vice president; and Faye C. Gaines, vice president and cashier. Capital is $200,000; surplus and other capital funds, $300,000. 79 T e r m L e n d in g : A L a g g in g R e sp o n d e n t to M o n e t a r y R e s t r a in t D u r in g a p e r io d of m o n e ta r y r e s tr a in t, banks d a te . A s a r e s u lt, a la r g e v o lu m e o f c r e d it w ill m u s t m a k e a d ju s tm e n t s fo r r is in g c r e d it d e m a n d s c o n tin u e a n d fo r r e d u c e d d e p o s it in flo w s o r d e p o s it lo s s e s . a g r e e m e n ts. I n e ffe c t, t h e s e c o m m itm e n ts is o la t e The fo r m flu e n c e d th e se by a d ju stm e n ts p a s t e x p e r ie n c e ta k e in w ill be in c r e d i t r e s t r a in t I n a m o n e ta r y r e s tr a in t p e r io d , b a n k e r s te n d to r e d u c e n e w lo a n c o m m itm e n ts a n d b e g in upon p r e v io u s s o m e p o r tio n s o f b a n k le n d in g fr o m t h e in flu e n c e o f a r e s tr ic tiv e m o n e ta r y p o lic y . T o illu s tr a te : le n d in g in te r e s t are ch arges 1968. H ow ever, in s u b s ta n tia l la g occurred be to c u t b a c k o n n e w lo a n c o m m it m e n ts . A la g a ls o c r e a s e d ; a n d m o r e e m p h a s is is p la c e d o n e n fo r c occurred in g th e se r e q u ir e m e n ts . a a n d th e tim e b a n k s c a m e u n d e r e n o u g h p r e ssu r e d o ex ten d . B a n k b a la n c e b ased t w e e n t h e t im e m o n e ta r y p o lic y b e c a m e r e s tr ic tiv e te r m s c o m p e n s a tin g e x te n d e d to ra tio n w h a t c r e d it t h e y tig h te n e d ; be M o n e t a r y p o lic y m o v e d to w a r d r e s tr a in t in la t e p e r io d s a n d b y b a n k p r a c tic e s . are to The b etw een c o m m itm e n ts th e tim e and borrow ers th e u sed tim e b a n k up le n d in g t y p e o f lo a n , t h e u s e o f t h e p r o c e e d s , a n d t h e c u s b e g a n to d e c lin e . T h is is a ls o th e p a tte r n th a t d e t o m e r ’s r e l a t i o n s h i p w i t h t h e b a n k b e c o m e m o r e v e lo p e d w ith t h e v o lu m e o f te r m b u s in e s s lo a n s im p o r ta n t fa c to r s to b e c o n s id e r e d in b a la n c in g (lo a n s w ith lo a n r e q u e s ts w ith t h e s u p p ly o f fu n d s a v a ila b le o n e y e a r ) 1 e x t e n d e d a t s o m e o f t h e la r g e r c o m fo r le n d in g . m e r c ia l b a n k s in t h e S ix t h F e d e r a l R e s e r v e D i s F o r e x a m p le , th e c o s t o f fu n d s to t h e b a n k m u s t b e w e i g h e d a g a i n s t t h e c u s t o m e r ’s lo n g - r a n g e v a l u e t o t h e b a n k . I n a d d i t i o n , b a n k er s m a y b e c o m e in c r e a s in g ly r e lu c ta n t to e x te n d an o r ig in a l m a tu r ity o f m o re th a n tr ic t. T erm lo a n s c o n tin u e d to expand s tr o n g ly th r o u g h o u t 1 9 6 9 , b u t s o m e s lo w d o w n w a s e v id e n t c r e d it fo r lo n g p e r io d s s o a s n o t to t ie u p lo a n a b le fu n d s w ith r e la t iv e ly fe w lo a n c u sto m e r s. B u t a ll th e s e a d ju s tm e n ts d o n o t t a k e p la c e im m e d ia t e ly — a c o n s id e r a b le p e r io d o f t im e m a y b e in v o lv e d . M a n y o f t h e la r g e r b a n k s m a k e s u b s ta n t ia l c o m m itm e n ts to le n d fu n d s w h ic h m a y b e u se d b y th e c u sto m e r w h e n n e e d e d a t a fu tu re 80 'T e r m lo a n s a ls o i n c lu d e a ll o u t s t a n d in g b u s in e s s lo a n s g r a n t e d u n d e r a f o r m a l a g r e e m e n t ( r e v o lv in g c r e d it o r s t a n d b y ) o n w h ic h th e o r ig in a l m a t u r it y o f t h e c o m m it m e n t w a s in e x c e s s o f o n e y e a r . N o t in c lu d e d a r e lo a n s p a y a b le o n d e m a n d , e v e n t h o u g h th e y h a v e n o t b e e n c a lle d o n o v e r a y e a r , o r lo a n s t h a t h a v e b e e n p e r io d ic a lly r e n e w e d f o r p e r io d s o f le s s t h a n a y e a r b u t h a v e r u n f o r lo n g e r t h a n a year. M O N TH LY R E V IE W d u r in g th e fir s t q u a r te r of 1970, a c c o r d in g to th r o u g h o u t th e y e a r , w h e r e a s sh o r t-te r m le n d in g m o n t h ly r e p o r ts fr o m t w e n t y - t h r e e o f t h e la r g e r d e c lin e d . D is t r ic t b a n k s .2 A t t h e e n d o f 1 9 6 9 , t h e s e b a n k s d u r in g la t e 1 9 6 9 w a s e n o u g h to o f fs e t t h e 4 -p e r a lo n e c e n t d e c lin e in sh o r t-te r m and a cco u n ted in d u s tr ia l fo r h a lf lo a n s at of to ta l S ix th b e r b a n k s a n d fo r m o r e th a n c o m m e r c ia l D is tr ic t m em h a lf o f th e te r m lo a n s . A t le a s t 5 0 p e r c e n t o f t h e c o m m e r c ia l a n d in d u s tr ia l lo a n s are in c lu d e d e x c e p t F lo r id a . T e r m fr o m each sta te, lo a n s m a k e u p 3 0 p e r c e n t o f th e b u s in e s s lo a n s a t th e s e tw e n ty -th r e e b a n k s. The e x p a n s io n in lo n g e r -te r m c r e d it b u s in e s s lo a n s . O n ly a s m a ll p o r tio n o f t h is sh o r t-te r m le n d in g a p p e a r s to have been c o n v erted in to lo n g e r -te r m bank fin a n c in g . T h e in c r e a s e in co n cen tra ted in te r m lo a n s d u r in g d u r a b le m a n u fa c tu r in g , th e and 1969 n o n d u r a b le tr a n s p o r ta tio n w as goods s e c to r ,3 a n d w h o le s a le a n d r e ta il tr a d e . T h is is n o t o u t o f lin e 1 9 6 9 M a r k e d b y S t r o n g E x p a n s io n w ith w h a t w e m ig h t e x p e c t, s in c e t h e d e m a n d s fo r F o r t h e D is t r ic t a s a w h o le , te r m lo a n s r o s e $ 1 2 4 m illio n d u r in g th e year th a t en ded D ecem ber 3 1 , 1 9 6 9 , b r in g in g t h e t o ta l to $ 7 7 4 m illio n . T h is 1 9 -p e rcen t in c r e a s e s in c e i t f o llo w e d a is e s p e c ia lly n o te w o r th y , 1 5 -p e r c e n t in c r e a s e in 1968 a n d c o n tr a s ts w ith th e r e d u c tio n in th e r a te o f in c r e a s e n o te d fo r la r g e b a n k s n a tio n a lly . in te r m e d ia te - and lo n g -te r m c r e d it, needed in p a r t to fin a n c e n e w p la n t a n d e q u ip m e n t a n d n e t a d d itio n s to w o r k in g c a p it a l, c o n t in u e d a t a h ig h le v e l. T h e s p e n d in g p a c e o f b u s in e s s e s in t h e S o u th e a s t h a s b e e n e x p a n d in g r a p id ly , w ith needs fo r lo n g -r u n lo n g e r -te r m g ro w th A c c o r d in g ly , e s p e c ia lly th e se s lo w G e n e r a lly , in to fin a n c in g th a t p art c a p ita l th e s p e n d in g resp on d c o m p a n ie s geared of th a t to th e p la n s c r e d it p r o v id e to c o u n tr y . are r e s t r a in t . tra n sp o rta t io n , e le c t r ic p o w e r , a n d n a tu r a l g a s f it in to t h is ca teg o ry . T erm le n d in g to th e se fir m s sh o w e d n o le tu p in 1 9 6 9 . D e s p it e e x p a n s io n in m o s t c a te g o r ie s o f term le n d in g , th e r e w ere w ea k n esses r e fle c te d a slo w d o w n in in so m e th a t a c tiv ity . T h e c o n str u c t io n in d u s tr y e x h ib ite d d e c lin e s in e m p lo y m e n t and in b u ild in g a c tiv ity , w h ile th e s e r v ic e in d u s t r ie s 4 w e r e le s s e x p a n s iv e th a n in 1 9 6 8 . C o r r e s p o n d in g ly , th e r e w a s a n a lm o s t c o m p le te la c k o f g r o w th in c o n s tr u c tio n te r m lo a n s . I n F lo r id a a n d G e o r g ia , t h e t w o s t a t e s t h a t a c c o u n t e d m o s t o f th e g ro w th in lo a n s to fo r t h e s e r v ic e in d u s tr ie s , t h e in c r e a s e la s t y e a r w a s o n ly 4 0 p e r c e n t o f t h e 1 9 6 8 a d v a n c e . I n F lo r i d a , l o a n s t o t h e se r v ic e in d u s tr ie s m a k e u p n e a r ly 3 0 p e r c e n t o f t h e te r m lo a n to ta l— t w ic e t h e p r o p o r tio n o f th e T erm lo a n s fo r t h e r e g io n h a v e a c c o u n t e d fo r D is tr ic t a v era g e. s lig h tly m o r e th a n 5 0 p e r c e n t o f th e a g g r e g a te in E v e n th o u g h th e r e h a s b e e n s o m e s h if tin g in c r e a s e in b u s in e s s lo a n s d u r in g th e la s t tw o y e a r s , th e te r m -lo a n c a te g o r ie s t h a t h a v e m a d e u p t h e a lth o u g h t h is le n d in g m a k e s u p a m u c h sm a lle r e x p a n s i o n i n 1 9 6 9 , t h e s t r u c t u r e o f t h e D i s t r i c t ’s p r o p o r tio n o f t h e b u s in e s s lo a n to ta l. M o s t o f t h is te r m s u r g e in te r m le n d in g c a m e fr o m b a n k s in G e o r c h a n g e d . L o a n s to fir m s p r o v id in g tr a n s p o r ta tio n g ia a n d F lo r id a — s t a t e s w it h b a n k s t h a t a r e a c a c c o u n t fo r 2 0 p e r c e n t o f t o ta l te r m lo a n t o ta ls has b a s ic a lly b een le ft un lo a n s a n d t iv e in te r m le n d in g . I n t e r m e d ia t e - a n d lo n g -t e r m a m a jo r so u r c e o f b a n k le n d in g p r o v id e d fin a n c in g fo r b u s in e s s fir m s in 1 9 6 9 . T e r m le n d in g c o n t in u e d to e x p a n d 2T h is g r o u p o f b a n k s in c lu d e s a ll D is t r ic t b a n k s th a t h a d $ 4 0 m illio n o u ts ta n d in g in c o m m e r c ia l a n d in d u s t r ia l lo a n s a t t h e in c e p t io n o f t h is s e r ie s in 1 9 6 7 . JU N E 1970 3 T h i s s e c t o r in c lu d e s : r a ilr o a d s , a ir lin e s , f r e ig h t c a r r ie r s , a n d w a t e r t r a n s p o r t a t io n . b u s lin e s , m o to r 4 I n c lu d e s s u c h n o n b u s in e s s s e r v ic e s a s : lo d g in g , a m u s e m e n t , r e c r e a t io n , m e d ic a l, le g a l, a n d e d u c a t io n a l s e r v ic e s . 81 C H A N G E S IN T E R M LOAN C A T E G O R IE S Million $ ^ H 40 1968 1969 / Durable Goods Mfg. Nondurabla Goods Mfg. Mining -2 0 Transportation, Comm. & P.U. Wholesale 8i Retail Trade a r e t h e la r g e s t te r m -lo a n c a te g o r y . T h e s e lo a n s a r e im p o r ta n t in a ll D is t r ic t s ta te s . T e r m lo a n s Construction Services c r e d it d e m a n d s . L o s in g d e p o s it s a t a n a c c e le r a te d r a te , m any of th e la r g e r banks began to r e ly fo r d u r a b le a n d n o n d u r a b le g o o d s m a n u fa c tu r in g m o r e h e a v ily c o m b in e d m a k e u p o n s a le s fr o m th e ir in v e s t m e n t p o r tfo lio s . F a c e d lo a n s . D u r a b le o v e r o n e -fo u r th g o o d s lo a n s p e r c e n t o f A l a b a m a ’s t e r m o f a ll te r m c o m p r is e about 28 lo a n s , w h e r e a s n o n d u r a b le g o o d s lo a n s a r e t h e m o s t im p o r ta n t c a t e g o r y in T e n n e s s e e . W h ile c r u d e p e tr o le u m n a tu r a l g a s e x p lo r a tio n (m in in g ) 5 p e r c e n t o f D is tr ic t term and in v o lv e s o n ly lo a n s , t h is c a te g o r y is r e la t iv e ly m o r e im p o r ta n t to s o u th e r n L o u is i a n a b a n k s . A l l o f l a s t y e a r ’s n e t g r o w t h i n t h i s f ie ld can be a ttr ib u te d to banks in so u th ern w ith o n e x p e n siv e b o r ro w ed fu n d s a n d t h e s e r e s tr a in in g c o n d itio n s , lo a n m e n ts w ere cut back, e s p e c ia lly fo r c o m m it new bor ro w er s a n d th o s e o u ts id e th e n o r m a l tr a d e a rea . E ven n ew m any fir m ly -e s ta b lis h e d c o m m itm e n ts r e d u c e d cu sto m ers b e lo w fo u n d th e ir r e q u e s ts a n d th e p a y o ff p e r io d a c c e le r a te d . M e a n w h ile , b a n k s w e r e e ith e r b o u n d b y v io u s c o m m itm e n ts or fe lt th e y had to p re honor r e q u e s ts fo r lo a n s fr o m lo n g -s ta n d in g ( a n d m a n y t im e s , la r g e n a t io n a l) c u s to m e r s w h o h a d s e ld o m L o u is ia n a a n d M is s is s ip p i. T e r m le n d in g d u r in g t h e l a s t se v e r a l y e a r s h a s r e q u e s te d a c c e s s to a lin e o f c r e d it b e fo r e . T h is b e e n m o s t h e a v ily c o n c e n tr a te d d u r in g t h e p e r io d h e lp s e x p la in th e a c c e le r a te d g r o w th o f D is t r ic t fro m A u g u s t to J a n u a r y . I n th e c a s e o f b u s in e s s e s te r m lo a n s a n d th e s lig h t s lo w d o w n o f su c h le n d d ir e c t ly s e r v in g th e p u b lic — th e tr a d e a n d s e r v ic e in g in t h e n a tio n a s a w h o le . in d u s tr ie s , w ith th e la tte r h e a v ily in flu e n c e d b y le n d in g in F lo r id a — s e a s o n a lit y p la y s a p a rt. T o th e b a n k in v o lv e d , s u c h a n in c r e a s e in te r m le n d in g h a s a n a d d itio n a l d r a w b a ck . W h e n fu n d s W h y th e r e is a str o n g d e m a n d fo r te r m lo a n s in a r e tie d u p fo r a n a v e r a g e o f fr o m fiv e to s e v e n s o m e o f t h e o th e r c a te g o r ie s d u r in g t h a t t im e o f y e a r s, term y e a r is le s s a p p a r e n t. I t m a y , h o w e v e r , r e p r e se n t p r o b le m s d u r in g a t e n d e n c y b y in d iv id u a l b u s in e s s e s t o c o n s o li h o w e v e r , d o h a v e s o m e in c e n t iv e s in te r m le n d in g d a te a n d c o n v e r t sh o r t-te r m b a n k a n d tr a d e c r e d it b e y o n d t h a t o f e s ta b lis h in g a c lo s e r r e la tio n s h ip in to lo n g -te r m w ith b u s in e s s c u sto m e r s. T o c o m p e n s a t e fo r r e b a n k b o r r o w in g p r io r t o t h e e n d le n d in g term lo a n s, a p a r t ic u la r n e s s lo a n s. E v e n o f th e la r g e te r m lo a n e x p a n s io n la s t y e a r , b a n k s, in g e n e r a l, h a d d if f ic u lt y in m e e t in g 82 to a b a n k ’s l i q u i d i t y p e r io d . B a n k s , b orrow er is g e n e r a lly c h a r g e d m o r e fo r te r m lo a n s th a n sh o r t-te r m b u s i B a n k s A d ju st to Loan R e q u e sts s p ite adds tig h t m o n e y d u c e d liq u id it y a n d g r e a te r le n d in g r is k s o f lo n g o f th e c a le n d a r o r f is c a l y e a r . In a term lo a n s m a d e p r io r t o th e c u r r e n t t im e h a v e n o t e s c a p e d h ig h in te r e s t r a te s charged on c u r r e n t lo a n s . In m any cases, M O N TH LY th e R E V IE W th o u g h COMPOSITION OF TERM LOANS t h e d a ta in c o m p a r a b le , th e m o s t c a s e s a r e n o t s tr ic tly general m ovem ent is c le a r — la r g e r D i s t r i c t b a n k s h a v e m a d e g r e a t s t r id e s in Durable Goods Mfg. 10.5% a p p r o a c h in g t h e p r o p o r tio n o f te r m le n d in g e x h ib ite d b y m a jo r b a n k s in o th e r a r e a s. A c c o r d in g to a s u r v e y ta k e n in th e sp r in g o f 1 9 3 9 , o n ly 5 p e r c e n t o f D is t r ic t w e e k ly r e p o r tin g b a n k s h a d b u s in e s s m ore, lo a n s w hereas w ith m a tu r itie s banks of one n a tio n a lly year or averaged 25 p e r c e n t. T h e N e w Y o r k C ity b a n k s a v e r a g e d 3 9 ■Wag p e rce n t. S in c e t h e n , t h e p r o p o r tio n o f te r m lo a n s in t h e D is tr ic t h a s Transportation, Comm. & P.U. 22.1% c lim b e d fr o m 14 p e r c e n t in 1946 to 2 2 p e r c e n t in 1 9 5 7 to 2 6 p e r c e n t in 1 9 6 7 . A t th e Wholesale & Retail Trade 20.1% end of D ecem b er 1969, 30 p ercen t o f th e D i s t r i c t ’s b u s i n e s s l o a n s h a d o r i g i n a l m a t u r i t i e s o f o n e y e a r o r m o re, b u t th is p e r c e n ta g e s till t r a ile d la r g e b a n k s in t h e N e w Y o r k a n d C h ic a g o F ederal N o te : D u e t o r o u n d in g , f ig u r e s d o n o t a d d t o 1 0 0 .0 % R eserve D is t r ic t s , w h ic h average over 5 0 p e r c e n t in te r m lo a n s . W ith t h is u p w a r d tr e n d in m a k in g m o r e te r m lo a n s , t h e s tr o n g e r s h o w in g la s t y e a r b y D is t r ic t c h a r g e o n t h e u n p a id lo a n b a la n c e i s p e g g e d to banks t h e le v e l o f t h e c u r r e n t p r im e r a te . S o m e te r m P a r t o f t h e D i s t r i c t ’s g a i n s i n t e r m l e n d i n g m a y over th o se n a tio n a lly is not su r p r is in g . “ e q u ity h a v e c o m e a t t h e e x p e n s e o f la r g e r b a n k s e l s e k ic k e r ” ) a llo w in g th e b a n k to s h a r e in t h e fu tu r e w h e r e t h a t w e r e u n d e r g r e a t e r p r e s s u r e t o r e s t r ic t p r o fits o f t h e b o rro w er— a lth o u g h le n d in g . T h is in it s e lf c o u ld h a v e c a u s e d lo a n s have p r o v is io n s (th r o u g h an th is p r a c tic e a p p a r e n tly is n o t w id e s p r e a d . so m e n a t i o n a l f i r m s t o s w i t c h t h e i r b o r r o w in g t o D i s tr ic t b a n k s. F a s t e r G ro w th S p a n s T h re e D e c a d e s F o r a lo n g t im e , th e p r o p o r tio n o f te r m lo a n s in t h e b u s in e s s lo a n to ta l h a s b e e n in c r e a s in g . A l JU N E 1970 J ohn M. G odfrey 83 S IX T H D IS T R IC T B A N K IN G r ii - 2 2 .0 - 21.6 S T A T IS T IC S i mm * DEPOSITS * - 9.7 Net Demand -9 .3 rj /V — 13.2 - - 5.5 Time 12.8 - 5.1 - 12.4 ro rj - 4.5 Savings - 7.0 Investments ** - 4.1 i 1969 - 6 .6 ~ 62 1970 1969 * D a i l y a v e r a g e f ig u r e s . * * F i g u r e s a r e f o r t h e la s t W e d n e s d a y N o te : i 1970 o f e a ch m o n th . A l l f ig u r e s a r e s e a s o n a lly a d j u s t e d a n d c o v e r a ll m e m b e r b a n k s . S IX T H D IST R IC T B A N K IN G NOTE TOTAL D EPO SITS SIXTH DISTRICT MEMBER BANKS 1957-59=100 FLORIDA - 200 LOUISIANA' - 260 - 160 u ALABAMA - GEORGIA 1969 - 260 M IS S IS S IP P I 220 - 250 - 220 - - 180 210 1970 1969 1970 * S ix t h D is t r ic t p o r t io n o n ly N o te : F ig u r e s s h o w n a r e s e a s o n a lly a d j u s t e d in d e x e s a n d a r e 84 f o r t h e la s t W e d n e s d a y o f e a c h m o n t h . M O N TH LY R E V IE W A fter m any months of deposit outflows—or at best, hesitant growth—Sixth D istrict member banks as a group experienced moderate growth in total deposits (seasonally adjusted) during M arch and A p ril of 1970. The advance since February totaled 2.8 percent. Though sm all, the previous runoff during much of last year lasted for such a long period of tim e that the peak reached in June 1969 was not exceeded again u n til A p ril 1970. However, what has been true of D istric t banks co llectively has not held for each state or for banks in d ivid u ally. A t the end of A p ril, nearly one-fifth of a ll D istric t member banks reported deposit totals below those of a year ago. Fo r the most p art, those banks with lower deposit totals were located in the larger cities of Flo rid a and Georgia. Demand deposits (net of interbank deposits) have risen nearly 2.5 percent since February. The strong advance of these deposits in M arch and A p ril more than offset m ild declines in the first two months of the year combined. A m ajor source of deposit growth came from inflow s of total tim e and savings deposits that have occurred after the Board of Governors in Jan u ary allowed banks to pay more competi tive rates on such deposits. The gain in savings deposits has not been large, but at least the previous trend of savings outflows has now been reversed. Tim e deposits (excluding savings) rose about 5 percent from February through A p ril, m aking it the largest upward surge of a ll types of de posits. Although the larger banks have been especially successful in attracting tim e deposits in denom inations of $100,000 and over, they have registered declines in the sm aller denomination “ consumer-type” tim e deposits. In the three months since the new regulations have been in effect, there has been a net increase of $128 m illion in large-denom ination, negotiable tim e certificates of deposit. T h is amounted J U N E 1970 to an increase of more than 30 percent. A t the same tim e, banks considerably lengthened the m aturity of these “ money m arket” instrum ents. Of the $200 m illion in new and m aturing C D ’s issued in A p ril, the average m aturity was six months, w ith a sizable portion being w ritten for a year or more. A s a resu lt, the average m aturity of a ll C D ’s at the end of A p ril increased to slight ly more than five months, compared w ith an average of three and a h alf months’ m aturity in Jan u ary. The m ajor purchasers of C D ’s were states and p o litical subdivisions—not private business firm s or individ uals. States and m unici p alities accounted for nearly two-thirds of the C D purchases in recent months, thus giving the banks holding government tim e deposits the ad vantage of relatively greater deposit sta b ility. U nlike business firm s and individuals la st year, state and local governments generally did not withdraw their C D ’s from the banks in order to reinvest th eir money in higher-yielding short term financial instrum ents. W hile large com mercial banks have recently experienced inflow s of large-denomination tim e deposits, sm aller banks have boosted th eir “ consumer-type” tim e deposits by more than 15 per cent. Those banks that offered the new, longerm aturity certificates of deposit w ith increased in terest rates quite noticeably attracted deposits. M ore than h alf of these consumer-held certificates outstanding at the end of A p ril had an original m aturity of at least one year, and one-fifth of the total volume outstanding had m aturities of two or more years. A pparently, savers are w illin g to commit funds to banks for longer periods of tim e if given the added incentive of a higher rate of return on th eir savings. Fo r D istric t banks co llectively, this means that after a long period of deposit outflows, deposit totals have again increased. John M. G o d fr e y 85 S ix t h D is t r ic t S t a t is t ic s S e a s o n a lly A d ju ste d (A ll d a ta a r e in d e x e s , 1 9 5 7 - 5 9 = Latest Month 1970 One Two Month Months Ago Ago I O O , u n le s s in d ic a te d o th e r w is e .) One Year Ago Latest Month 1970 One Two Month Months Ago Ago One Year Ago FLORIDA SIXTH DISTRICT INCOME AND SPENDING . Apr. . Mar. , Mar. Mar. 250 180 129 . Apr. . Apr. Nonfarm Em ploym entt.......................... . Apr. Manufacturing ..................................... . Apr. Manufacturing P a yro lls.......................... Farm Cash R e c e ip ts ................................ C r o p s .......................................................... L iv e sto c k ..................................................... Instalment Credit at Banks* (Mil. $) New Loans ............................................... .......................................... Repayments Apparel ..................................................... Paper .......................................................... C h e m ic a ls ............................................... Durable G o o d s .......................................... Primary M e t a ls ..................................... Stone, Clay and G l a s s ..................... Fabricated M e t a ls ................................ Transportation Equipment . . . Mar. Mar. Mar. Mar. Mar. Mar. Mar. Mar. 340 189 344 172 314 175 Nonfarm Employmentt . . . . . . Apr. ................................ Manufacturing Nonm anufacturing........................... . . Apr. C o n s t ru c tio n ................................ . . Apr. 178 177 178 139 82 177 177 176 139 81 177 179 177 142 79 170 179 168 118 81 3.2 40.9 3.1 41.2 2.9 40.9 2.3 41.5 391 260 303 279 287 358 259 273 258 188 261 175 258 153 141 158 144 50 153 142 141 147 51 51 151 144 154 153 50 (Percent of Work Force)t . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Apr. 40.6 40.3 39.9 41.7 FINANCE AND BANKING Member Bank L o a n s ........................... . . Apr. Member Bank Deposits..................... • • Apr. • - Apr. 345 233 328 348 233 340 347 229 340 333 255 302 . . Mar. 198 193 194 196 199 158 188 180 . . Apr. 132 . . Apr. . . Apr. . . Apr. Apr. 135 128 47 6.0 133 123 136 132 48 5.9 134 124 136 134 50 5.5 132 123 137 130 57 5.4 . Apr. 42.1 41.6 41.4 41.8 . Apr. . Apr. 287 182 215 280 179 198 282 177 203 253 178 197 . Apr. 268 231 271 189 272 190 265 179 . . . . Apr. Apr. Apr. Apr. 152 159 149 168 46 151 160 148 167 49 152 160 148 175 49 148 160 142 139 48 . Apr. . Apr. 5.3 39.8 4.7 40.0 4.3 40.1 4.1 41.1 FINANCE AND BANKING Member Bank L o a n s * ........................... Member Bank D e p o s its * ..................... Bank D e b its*/**.......................................... . Apr. 421 283 286 275 291 298 386 264 267 201 359 317 328 316 311 276 358 314 152 147 174 137 176 152 148 174 142 178 152 149 174 144 178 120 120 121 148 149 174 142 174 115 107 129 128 114 198 154 140 54 107 129 133 114 197 153 142 55 109 129 133 115 130 129 117 200 211 154 145 56 148 132 58 INCOME 3.6 EMPLOYMENT Nonfarm Employmentt . . . . . . Apr. Manufacturing ................................ Nonm anufacturing........................... C o n s t ru c tio n ................................ Farm Em ploym ent................................ . . Apr. 4.3 4.0 3.8 2 .6 257 284 2.3 40.4 204 247 166 165 103 273 240 205 161 228 252 203 258 281 2.3 40.3 246 246 246 166 103 271 239 205 160 233 254 204 259 280 200 201 202 172 247 370 176 246 353 170 246 361 40.6 249 262 238 158 105 277 241 206 162 229 257 200 110 1.8 41.5 193 225 165 154 no 257 223 193 151 219 245 186 251 260 173 168 234 336 Apr. Apr. 348 293 345 287 342 287 318 274 Apr. Apr. Apr 231 194 290 228 187 279 225 185 280 231 198 266 ALABAMA INCOME EMPLOYMENT Unemployment Rate (Percent of Work Force)t . . • • • Apr. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Apr. FINANCE AND BANKING Member Bank L o a n s .......................... Member Bank Deposits..................... Bank D e b its**.......................................... 391 GEORGIA Manufacturing Payrolls . . . . Farm Cash R e c e ip ts ........................... 201 247 174 2.8 LOUISIANA INCOME Manufacturing Payrolls . . . Farm Cash R e c e ip t s ..................... EMPLOYMENT Nonfarm Em ploym entt..................... Manufacturing ................................ ..................... Nonmanufacturing C o n s t ru c tio n ................................ Farm Em ploym ent................................ Unemployment Rate (Percent of Work Force)t . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . 122 FINANCE AND BANKING Member Bank L o a n s * .......................... Member Bank D e p o s its * ..................... Bank D ebits*/**..................................... M ISSISSIPPI Manufacturing P a y ro lls ................................ Apr. Farm Cash R e c e ip ts ..................................... Mar. 215 215 217 187 218 193 205 154 EMPLOYMENT Nonfarm Em p loym entt................................ Manufacturing .......................................... Nonmanufacturing ................................ C o n s t ru c tio n .......................................... Farm Em ploym ent.......................................... Unemployment Rate (Percent of Work F o rc e )!..................... Avg. Weekly Hrs. in Mfg. (Hrs.) . . . 345 125 240 168 173 170 FINANCE AND BANKING Loans* All Member B a n k s ..................................... Large Banks ............................................... Deposits* All Member B a n k s ..................................... Large Banks ............................................... Bank D ebits*/**................................................ . . Apr. 252 175 153 203 EMPLOYMENT AND PRODUCTION C h e m ic a ls ............................................... . Apr. Fabricated M e t a ls ................................ . Apr. F o o d ............................................................... . Apr. Lbr., Wood Prod., Furn. & Fix. . . . Apr. Paper .......................................................... . Apr. Primary M e t a ls ......................................... . Apr. Textiles ..................................................... . Apr. Transportation Equipment . . . ., Apr. N o n m an u factu rin g t................................ . Apr. C o n s t ru c tio n .......................................... . Apr. Farm Em ploym ent......................................... , Apr. Unemployment Rate (Percent of Work Force)t . . . . . Apr. Insured Unemployment (Percent of Cov. E m p .).......................... Apr. Avg. Weekly Hrs. in Mfg. (Hrs.) . . . Apr. Construction C o n tr a c ts * .......................... . Apr. R e s id e n tia l.................................................... . Apr. All O th e r.......................................................... Apr. Electric Power Production** . . . ., Mar. Cotton Consum ption**............................... , Mar. Petrol. Prod, in Coastal La. and Miss.* *Apr. Manufacturing P ro d u c tio n ..................... Mar. Nondurable G o o d s ..................................... Mar. Food .......................................................... Mar. Manufacturing Payrolls . . . . Farm Cash R e c e ip ts ........................... 252 180 177 189 Apr. Apr. Apr. Apr. Apr. 133 134 133 123 53 133 134 133 Apr. Apr. 4.7 40.4 Member Bank L o a n s ..................................... Apr. Member Bank D e p o s it s .......................... Apr. Bank D e b i t s * * ............................................... Apr. 315 218 255 131 134 130 55 134 136 133 123 56 4.3 40.5 4.0 40.5 4.0 41.6 311 216 253 311 213 249 279 216 233 12 1 12 2 61 FINANCE AND BANKING 86 INCOME Manufacturing Payrolls.......................... Farm Cash R e c e ip ts ................................ EMPLOYMENT Nonfarm Em ploym entt.......................... Manufacturing ..................................... Nonmanufacturing................................ C o n s t ru c tio n ....................................., Farm Em ploym ent..................................... Unemployment Rate (Percent of Work Force)t . . . . Avg. Weekly Hrs. in Mfg. (Hrs.) . . M O N TH LY R E V IE W Latest Month 1970 Manufacturing Payrolls. . . . . . . Apr. Farm Cash R e c e ip ts............ . . . Mar. 241 147 One Two Month Months Ago Ago 246 142 One Year Ago 245 121 237 139 One Month Ago Two Ago Ago 147 158 55 148 166 54 148 170 58 142 156 59 4.6 40.2 4.0 39.8 3.7 39.8 3.6 41.0 344 219 320 332 208 294 325 203 273 304 206 305 Latest Month 1970 Nonmanufacturing.................. C o n stru c tio n ..................... Farm Employment..................... Unemployment Rate (Percent of Work Force)t . . . . Avg. Weekly Hours in Mfg. (Hrs.) . . Apr. FINANCE AND BANKING EMPLOYMENT Nonfarm Employmentt . . . . . . . Apr. Manufacturing ............... . . . Apr. 149 154 147 157 151 157 150 156 Member Bank L o a n s * ............... Member Bank D e p o s its* ............ Bank Debits*/**........................ “ Daily average basis tPreliminary data r-Revised N.A. Not available Sources: Manufacturing production estimated by this Bank; nonfarm, mfg. and nonmfg. emp., mfg. payrolls and hours, and unemp., U.S. Dept, of Labor and cooperating state agencies; cotton consumption, U.S. Bureau of Census; construction contracts, F. W. Dodge Div., McGraw-Hill Information Systems Co.; petrol, prod., U.S. Bureau of Mines; industrial use of elec. power, Fed. Power Comm.; farm cash receipts and farm emp., U.S.D.A. Other indexes based on data collected by this Bank. All indexes calculated by this Bank. ‘ For Sixth District area only; other totals for entire six states D e b it s t o D e m a n d D e p o s it A c c o u n t s In s u r e d C o m m e r c ia l B a n k s in th e S ix t h D is t r ic t (In T h o u s a n d s o f D o lla r s ) Percent Change March 1970 April 1970 April 1969 April 1970 From Mar. Apr. 1970 1969 Year to 4 mos. 1970 from 1969 STANDARD METROPOLITAN STATISTICAL AREASf Birmingham . . . . 2,004,818 70,377 Gadsden . . . . 218,242 Huntsville . . . 769,388 ............ Mobile Montgomery . . 386,660 127,346 Tuscaloosa . . . 2,011,147 68,730 219,690 728,233 382,874 127,080 1,924,845 68,727 210,350 572,531 354,960 117,462 + + + + 0 2 1 6 1 0 + 4 + 2 + 4 +34 + 9 + 8 + 9 + 6 + 13 +22 + 4 + 6 Ft. LauderdaleHollywood . . Jacksonville . . . Miami ............ Orlando . . . . Pensacola . . . Tallahassee . . . Tampa—St. Pete. . W. Palm Beach 1,144,686 2,068,690 3,713,421 822,413 251,426 202,321 2,071,073r 685,654 1,119,215 1,904,587 3,631,358 765,337 232,584 172,752 1,982,325 705,692 + 15 - 1 + 5 + 9 + 10 - 5 + 8 + 14 + 18 + 7 + 8 + 17 + 19 + 11 + 13 + 11 + 11 + 9 + 12 + 15 + 12 + 17 + 16 + 16 127,759 Albany ............ Atlanta ............ . 7,758,093 327,824 Augusta . . . . 296,836 Columbus . . . . Macon ............ 312,854 350,398 Savannah . . . . 126,231 7,964,260 316,129 278,850 327,206 349,278 109,109 7,017,050 322,868 274,398 346,229 347,115 + + + + + 17 + 13 + 11 +22 + 2 + 8 + 8 + 2 -1 0 + 1 + 1 + 4 829,624 Baton Rouge . . 188,452 Lafayette . . . . Lake Charles . . 163,143 New Orleans . . . 2,855,435 795,106 167,046 163,691 2,636,230 588,272 163,042 168,896 2,693,173 + 4 + 13 - 0 + 8 +41 + 16 - 3 + 6 +30 + 8 - 0 + 6 168,897 801,196 168,205 830,940 125,943 769,748 + 0 - 4 +34 + 4 +32 + 15 Chattanooga . . 886,117 Knoxvlile . . . . 614,065 Nashville . . . . . 2,291,952 889,246 574,375 2,015,922 795,218 555,525 2,307,672 81,461 92,570 50,684 37,672 117,917 239,912 112,520 75,178 91,165 51,629 36,709 103,538 238,261 99,443 77,920 77,530 49,791 40,957 103,231 252,465 108,170 + 8 + 5 + 2 + 19 - 2 + 2 + 3 - 8 + 14 + 14 + 1 - 5 + 13 + 4 + 9 + 16 + 2 - 3 + 6 - 3 + 7 149,951 135,261 147,176 + 11 + 2 Biloxi-Gulfport Jackson . . . . . 1,319,193 . 2,043,262 . 3,911,548 892,456 276,571 191,396 . 2,233,708 784,739 1 3 4 6 4 0 - 0 + 11 + 14 + 7 + 11 + 5 -1 4 - 1 -1 4 3THER CENTERS Anniston . . . . Dothan ............ Selma ............ Bartow ............ Bradenton . . . Brevard County Daytona Beach Ft. Myers— N. Ft. Myers ’ Includes only banks in the Sixth District portion of the state JU N E 1970 + 2 fPartially estimated April 1970 March 1970 Gainesville . . . Lakeland . . . . Monroe County ............ Ocala St. Augustine . . St. Petersburg . . Sarasota . . . . Tampa ............ Winter Haven . . 127,554 169,456 47,958 107,393 25,899 543,287 218,404 1,129,438 96,343 112,840 160,760 45,961 98,178 24,370 456,551r 196,572 1,117,475 96,029 Athens ............ Brunswick . . . Dalton ............ Elberton . . . . Gainesville . . . Griffin ............ LaGrange . . . . Newnan . . . . 107,465 57,080 121,578 18,874 90,915 43,654 24,732 33,229 96,972 69,263 Abbeville . . . . Alexandria . . . Bunkie ............ Hammond . . . New Iberia . . . Plaquemine . . . Thibodaux . . . Hattiesburg . . . Laurel ............ Meridian . . . . Natchez . . . . Pascagoula— Moss Point . . Vicksburg . . . . Yazoo City . . . Bristol ............ Johnson City . . Kingsport . . . . XTH DISTRICT, Total Alabama* . Florida* . Georgia* . Louisianaf* Mississippi** Tennesseet* Valdosta ^Estimated . . . . . . . . . . . . . ■ . • . . . . April 1969 Percent Ch ange Year to March date 1970 4 mos. From 1970 Mar. Apr. from 1970 1969 1969 110,966 +13 157,347 + 5 46,794 + 4 80,839 + 9 28,409 + 6 452,257 + 19 171,975 + 11 1,027,733 + 1 90,498 + 0 +15 + 8 + 2 +33 - 9 +20 +27 + 10 + 6 +13 +15 + 5 +26 - 8 + 11 +29 +19 +16 100,808 54,062 117,860 18,804 89,282 44,420 26,651 29,978 93,118 64,268 96,258 + 7 +12 53,139 + 6 + 7 133,582 + 3 - 9 17,748 + 0 + 6 79,606 + 2 + 14 38,825 - 2 + 12 34,229 - 7 -2 8 25,218 + 11 +32 87,896 + 4 + 10 63,471 + 7 + 9 + 9 +12 - 5 + 12 +18 + 16 - 6 +24 + 9 + 9 12,870 151,171 7,507 45,846 42,874 13,174 26,554 13,012 161,565 7,632 45,618 41,829 12,787 27,233 12,107 193,750 8,384 45,262 37,880 14,411 25,993 + + + + + 84,429 47,880 79,737 42,548 61,406 50,164 78,577 44,916 70,761 45,195 85,525 46,245 88,609 50,289 39,263 104,035 112,881 199,836 93,427 51,321 25,047 109,625 106,563 207,156 80,364 41,445 35,891 95,094 103,697 205,404 - 5 - 2 +57 - 5 + 6 - 4 + 10 + 11 +21 +19 + 9 -1 6 + 9 + 8 + 9 +13 - 3 - 5 44,345,187 42,651,840r 40,671,590 + 4 + 10 5,211,054 14,872,812 11,545,742 5,033,868 1,871,840 5,809,871 5,106,140 4,769,251 13,945,656r 13,387,234 11,626,230 10,629,419 4,751,636r 4,599,087 1,854,082 1,743,086 5,368,096 5,543,513 + + + + + + + + - 1 + 6 6 -2 2 2 -1 0 0 + 1 2 + 13 3 - 9 2 + 2 2 9 5 6 7 1 1 +37 + 19 - 7 - 5 + 6 + 16 + 1 - 7 - 1 - 5 - 8 - 0 + 11 2 + 9 + 9 7 + 11 + 13 1 + 9 +16 6 + 10 + 9 1 + 7 +13 8 + 5 - 2 r-Revised 87 D is t r ic t B u s in e s s C o n d it io n s The slow dow n in e co n o m ic activity h a s spread to m ore sectors. Farm ing, however, is a m ajor exception. In April, labor c o n d itio n s slackene d; m a n u fa c tu rin g em ploym ent declined; and total u n em p loym en t rose for the third consecutive m onth. C o n su m e r s p e n d in g rem ained slu g g ish , a n d credit d e m a n d s from b a n k s by b u sin e sse s began to show s ig n s of easin g. C o n stru ctio n co ntract volum e rebounded in A pril, sin c e both residential and “all other” types show ed strength. The p o ssib ility of an early recovery in s in g le fam ily h o u sin g re m ain s som ew hat uncertain, however. In m o st areas, farm incom e in A pril w as higher than a year ago. T h e D i s t r i c t ’s l i v e s t o c k se c to r B a se d upon pre lim in ary reports from m em ber banks, le n d in g ad van ce d only m a rgin a lly in M ay. c o n tin u e s to s h o w s tr e n g th in s p it e o f p r ic e d e B ankers at c lin e s dem and fo r b u s in e s s fo r h o g s, o u tp u t a n d eggs, stro n g and c a ttle b r o il e r s . I n c r e a s in g p r ic e s h a v e b o ls te r e d and th e th is le tu p la r g e r w o u ld banks c r e d it seem in d ic a te m ay be th a t th e s u b s id in g , to b e s u b s ta n tia te d in c o m e s . L o w e r v e g e t a b le a n d c itr u s p r ic e s h a v e by s h a r p l y r e d u c e d F l o r i d a ’s c r o p i n c o m e , h o w e v e r , A p r i l . A p r i l ’s and a r e n o w e b b in g ; h o w e v e r , t im e a n d s a v in g s d e L o u i s i a n a ’s lin g e r in g e ffe c ts crop of se c to r la s t is y e a r ’s su ffe r in g fr o m d r o u g h t. D ry th e u n c h a n g e d v o lu m e o f b u s in e s s lo a n s in la r g e in flo w s o f d e m a n d d e p o s its p o s it s c o n t in u e to in c r e a s e . w e a th e r in M a y d a m a g e d c r o p s in m u c h o f th e C o n su m e rs rem aine d app reh en sive. A u t o s a l e s D is tr ic t. c o n tin u e d to tr a il b e h in d th e ir A p r il 1 9 6 9 p e r An April rebound in non residential constru ction fo r m a n c e . H o w e v e r , in d ic a tio n s a r e th a t d e p a r t contracts and contin u ed strength in the resid en m e n t sto r e s a le s fa red s lig h tly b e tte r th a n th e y tial sector reversed a tw o-m onth decline in total d id a t t h is t im e la s t y e a r . T o t a l c o n s u m e r c r e d it contract aw ards. o u ts ta n d in g e x h ib ite d a s lim Som e very la r g e aw ards in in c r e a s e . J a n u a r y fo r u t ilit ie s a n d o th e r t y p e o f c o n s tr u c t io n produced an e x c e p tio n a l b u lg e w h ic h w a s n o t r e p e a t e d in in v o lu m e , F eb ru ary or M arch . Overall labor m arket c o n d itio n s co ntin u ed to weaken in April. T o ta l n o n fa r m e m p lo y m e n t A p r i l ’s s t r e n g t h i n d i c a t e s t h a t w h a t a p p e a r e d t o w a s u n c h a n g e d , w ith a g a in in n o n m a n u fa c tu r in g b e a s lo w d o w n in to ta l c o n s tr u c tio n h a s n o t y e t r o u g h ly m a te r ia liz e d . I n f lo w s o f f u n d s to M a n u fa c tu r in g e m p lo y m e n t w a s d e p r e s s e d a g a in th r ift in s t it u o ffs e ttin g a d e c lin e in m a n u fa c tu r in g . t io n s h a v e in c r e a s e d o n ly s lig h t ly s in c e th e v e r y b y a c o n tin u e d e m p lo y m e n t d e c lin e in c h e m ic a ls , s h a r p d e c lin e e a r lie r t h is y e a r . T h is s lig h t im p r im a r y p r o v e m e n t d o e s n o t w a r r a n t m u c h o p tim is m fo r u n e m p lo y m e n t r a te r o s e fo r t h e th ir d c o n s e c u tiv e h o u s in g m o n th . H o w e v e r , m a n u fa c tu r in g p r o d u c tio n r o s e an e a r ly recovery o f th e m a r k e t. Digitized 8 8 for FRASER s in g le -fa m ily m e ta ls , a n d o th e r d u r a b le g o o d s. The in M a r c h . MONTHLY REVIEW JU N E 1970
@FedFRASER